Author: Michael Griffin
According to a 2008 report from the American Savings Education
Council and the AARP, only 52% of gen Y members (those born
between 1980 and 1988) save money on a regular basis.
Additionally, 57% report that they have credit card debt. When
parents are raising their teenagers, it’s likely that prepaid
cards are the last things that come to mind. However, in light
of frightening statistics regarding young adults and their
finances, money management needs to be given priority when it
comes to raising your children.
With financial institutions crumbling all around us, it’s the
perfect time to truly emphasize to your teens just how important
and fundamental money management is to their livelihood. Credit
cards allow people to live beyond their means. When abused,
credit card users encompass this attitude of “buy now, pay
later.” It’s reasonable to expect that young adults who’ve
either always had things handed to them in life, or who’ve never
got what they wanted, would jump at the chance to have a credit
card without truly understanding the responsibility that it
comes with. Before your teen turns 18 and can obtain a credit
card without your consent, try teaching them how to handle their
finances with a prepaid Visa card.
Prepaid Visa cards (https://www.netspend.com/) are an excellent
way to teach teenagers several valuable lessons, first and
foremost, money management. Prepaid cards are a great way to
make the correlation between the use of plastic with actual
funds available. For instance, if your teen has a summer job,
make them place some or all of their earnings on their card and
give them the tools to understand how to use the card. There is
minimal risk, as there will not be any overdraft fees since you
can’t spend more than is on the card. Additionally, as most
prepaid cards allow you to keep track of your balance online,
use this to force your teen to attach work (money earned) with
their budget. Explain to them that if you make X amount of
dollars each week, you have X amount to spend for the total
month, so spend wisely.
Secondly, prepaid Visa cards force teens to prioritize their
purchases. If you’ve been making and spending your own money for
years, it would be easy for you to decide between paying for a
school loan vs. a new car, however, if you’ve never had to weigh
the pros and cons of a purchase, it can be a daunting task.
Prepaid Visa cards (https://www.netspend.com/) solidify the tie
between the funds teens have (or have worked for) and how they
should spend them. For instance, let’s say your teen comes to
you and wants an Xbox, but prom is right around the corner and
he needs a tux and wants to rent a limo with his friends. For an
adult, this would be a lighthearted and easy decision, but for a
teen, this is a fundamental stepping stone to bigger financial
decisions. This forces teenagers to see that sometimes they have
to make a choice between two options, as opposed to a credit
card, where the need for a choice may not be as clear. Teens
with credit cards often get themselves in financial debt by
spending more than what they have.
While managing finances is only part of the numerous life
lessons parents have to teach their teens as they grow up, it’s
an important one, and one that seems to get overlooked on too
many occasions. Taking simple steps to teach your teenager about
money management before they turn 18 will highly benefit them in
the long run. You can’t always be around to advise your
children, so instill in them the logic they will need to stay
out of debt and make the right financial decisions as they grow
up.
About the author:
Michael is currently a 4th year accounting student at the
University of Texas at Austin. He is particularly interested in
business finance and debt. Additionally, he is writing his
thesis on prepaid visa cards and prepaid credit cards for teens,
distinguishing how young people learn the importance of handling
their money only by hands on experience.
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